Analysis: Amazon’s Acquisition of One Medical

Here is why we think that the move is smart and what it means for the future of Amazon in the long-run:

The real ‘everything store’

After buying healthcare startup PillPack in 2018, Amazon took a significant step forward in its attempt to offer literally everything on its platform. Enabling customers to buy prescription drugs is surely a complex undertaking, but at the same time, Amazon has all the necessary ingredients in place to market, sell, and ship prescribed medicine in a way that makes the user experience smooth, safe and reliable. The lock-in effect of using Amazon for ordering nearly every product one could need in daily life is getting bigger and bigger – especially as health-related products require high levels of consumer trust. Enhancing the available pharmaceutical products with related services like tele-consultations and easy scheduling of doctor’s appointments strengthens each of the respective offerings.

Leveraging AI & cloud technology

With the acquisition, Amazon is also leveraging its Amazon Web Services (AWS) cloud and artificial intelligence (AI) capabilities. One Medical had established itself as a forward-thinking, modern healthcare provider where digital technology improves the offered services not just online, but also within its own brick-and-mortar doctors’ offices across the US. Adding Amazon’s large tech competencies and infrastructure creates a strong platform for improving the overall patient experience as well as using the amassed data to identify public health trends and make predictions around illnesses and treatments – something Amazon has been silently working on for quite some time as the recent announcement of the company’s partnership with the Fred Hutchinson Cancer Research Center to develop cancer vaccines shows too.

Subscriptions are good business

Amazon’s Prime program has become a steady and profitable revenue stream over the years. Besides quicker delivery options, video streaming has made it even more attractive for members. By adding One Medical to its conglomerate, Amazon immediately gets access to another proven membership model within a market it has set its sights on. The One Medical platform gives subscribers 24/7 virtual care access via its telehealth app. This opens up the opportunity to offer subscription bundles and establish “Prime for Health” in the long-run.

Conclusion

After all, acquiring One Medical for 3.9 bn US dollars looks like a strategically sound investment to me that underlines Amazon’s continued push for profitability under CEO Andy Jassy – who already had proven how to build a ‘cash cow’ by building up AWS in the past. In healthcare, profitability margins are actually higher than in e-commerce. Adding an existing subscriber base and a proven tech-enabled platform will allow the company to establish itself as a healthcare provider even faster. It is only a matter of time until Amazon will have converted many of its existing customers also into subscribers for its health-related services and product offerings.